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Created: 01 April 2017

• Retirement
• savings
• plan b
• investments

In our last article, we discussed why you need a Plan B for retirement. In this article, we want to provide some ideas for what that plan might include.

Let’s assume your Plan A consists of traditional retirement accounts that you’ve been adding maximum contributions to during your entire working career. Your Plan A has accounted for sufficient savings, strategies for spending, drawing from retirement accounts, taxation, and health care. While theoretically, this is a great first step, even with maximizing your retirement contributions, having a backup plan or two can help to ensure you will have enough to live happily into retirement and be prepared for the unexpected.

Having a Plan B is all about securing income streams to sustain you in retirement. Think of it as more than diversifying your existing retirement accounts. Those can still be affected by major life changes, such as a recession or a divorce. And you don’t want to be limited by one income stream. Your Plan B should create diversity in the types of wealth you accumulate.

5 Ways to Diversify with a Plan B

Savings and Investments Outside of Retirement Plans

Having savings for emergencies is critical for everyone, but having a savings cushion is a great backup for retirement. This is not your 6-month emergency fund. To create a savings cushion for retirement, we are referring to growing a large nest egg in your savings outside of your typical retirement plans. This requires you to commit to save more in addition to your retirement savings. Say you put aside an additional 5 to 10% of your income in an investment account each year for 20 to 30 years. By the time you retire, you could have a savings cushion of hundreds of thousands of dollars. The key is to start saving and investing more as early as possible. This type of investment account will also allow for the flexibility to use these funds prior to the 59-½ age requirement associated with dedicated retirement accounts, so as to avoid early withdrawal penalties.

Home Equity

For many, home equity is their largest asset and offers a great safety net for retirement. But it’s important to understand how you can use that asset to your best advantage in retirement. It makes no sense to live in your house if you are starving or can’t afford the upkeep. Instead think of ways you can tap into its value by converting it into an income stream. Some of the ways to do this include downsizing, refinancing, and opening an equity line of credit. Downsizing can be the most efficient since you can turn the equity difference into an immediate income stream and usually avoid any capital gains associated with the appreciation of your home ownership. A line of credit can be used to avoid tapping other retirement investments in down periods by providing short term access to funds on an as-needed basis.

Working After Retirement

More people are planning to work after they retire. It could be continuing to work in their career, starting a new business, or taking on a side job. Working longer will not only help you to bring in income to maintain your lifestyle, it will give your investments more time to grow and help to reduce the length of time that you'll be living off savings.

Delaying Social Security Withdrawals

Each year you delay withdrawing from social security, you can boost your benefits by increasing your payment amount. Therefore, it makes sense to delay withdrawing from social security for as long as possible. Just be aware that if you draw from other sources, you'll need to account for taxes and potential early-withdrawal penalties, if you use your retirement accounts.

Investing in Insurance

Besides financial setbacks, ill health is a major issue that often affects your retirement plans. Even with it being such an issue, many people don’t adequately anticipate how much they will spend on healthcare in retirement. An option to look at is investing in health supplements that help to offset the costs for prescriptions and major illnesses. Another insurance option to look at is long-term disability (LTD) insurance in your early years before you retire. LTD insurance is a policy that protects you from loss of income if you are unable to work due to illness, injury, or accident for a long period of time. This can help prevent you from having to dig into your retirement and other savings too early. Long-Term-Care Insurance and the use of Health Savings Accounts are other ways to build a solid Plan B for your retirement years.

There are many ways to create a Plan B for retirement. At Reagan Financial Planning, we can help you create a plan or evaluate an existing plan. Contact us at (770) 658-9440 to learn more.

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Created: 28 March 2017

• Retirement
• savings
• plan b
• investments

Do you have a Plan B for when you retire? Life is full of surprises. You’ve spent decades planning and saving for retirement. You saved for retirement by faithfully putting money into a plan such as a 401K or IRA. Many people wonder if it will be enough. What will your retirement savings be when you are ready to retire? Will it be enough for what you need? Do you have the right plan? These and other questions are great starters for thinking about having a Plan B for retirement.

3 Reasons You Need a Plan B

Life is not perfect.

Unfortunately, things happen that are beyond your control. These affect your retirement plans. You could lose your job, have a major-medical issue, get a divorce, or lose savings from a market crash. The Great Recession of 2008 saw many investment accounts, including those for retirement, plunge. This left retirees and those close to retiring without the funds they were relying on. People lost their jobs that stopped the flow of positive investments. And if you’ve experienced anything like a divorce, your retirement savings could have been cut in half.

You’ve experienced income creep.

If you have a salary that has continuously gotten bigger as you age, you’ve most likely adjusted to the lifestyle that matches that salary. The term is called income creep, and it could be difficult to maintain into retirement. In addition, you might be surprised to learn that your payments from your retirement savings, pension plans, and social security will be a lot less than the salary you’ve become so accustomed to getting. While you might think that you won’t need that same annual income when you retire, you have your habits that are hard to break. Be realistic. You have a standard of living to maintain that needs a strategy and a backup plan.

You are more likely to live longer.

Times have changed when it comes to thinking about retirement. A decade or two ago, people thought about retirement as the end of their life in terms of only so many years. Today’s retirees can expect to live another 20 to 30 years. That’s about the same amount of time you spent in your working career. How much will you need so you don’t run out of money? One current estimation from a formula by Fidelity indicates you need about eight times your final salary at retirement.

By creating a Plan B, you can better ensure you will be able to retire safely and securely. You can reduce your risk by not putting all your eggs in one basket. If you want to learn more about creating alternate plans or want to evaluate your current plan, contact Reagan Financial Planning.

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Created: 08 March 2017

• Financial Planning
• Retirement
• Myths

Whether you are just starting your career or you have been in the workforce for years, you might have some misconceptions about retirement. There is not a magic formula or an exact way to plan for retirement. But there are some very bad decisions you can make along the way to this important destination. A major mistake can become a crisis in terms of retirement. Make better decisions by being aware of the risks and debunking some of the myths.

4 Retirement Myths Debunked

Myth#1: You have plenty of time to save for retirement.

Retirement might seem far off with the thought that you could easily postpone learning, planning, and saving for it. In fact, the very question of what is easiest is wrong. It’s always easy to procrastinate. Instead, ask yourself what is the best way to secure your retirement. A secure retirement requires you to begin saving as soon as possible. Now is the best time to develop the habit and start to compound your money so it grows to the it’s full potential. Since retirement accounts can grow exponentially over time, the earlier you begin the habit of saving for your retirement the more growth potential your money has to meet this future need.

Myth #2: It is the beginning of the end.

Historically, retirement came at a time when people only had a few years left to live. You could expect to work hard and have those last years to be taken care of. Today’s vision of retirement has changed significantly. First, there is the concept of not waiting to be happy. Enjoy life and take care of yourself. Second, understand that the attitude you have now will likely be the same attitude you have in retirement. That attitude, along with a healthy lifestyle, is helping people live longer, more fulfilling lives. As a retiree, you can expect to enjoy a mix of activities that include physical exercise, mental stimulation, and socialization. And with the average life expectancy at approximately 85 years of age, you could live more than 25 to 30 years after you retire. Your savings and investments may need to last as long as the length of your working career.

Myth #3: You’ll be on a continuous vacation.

While you could live longer into retirement, you might be surprised to know that it won’t be all vacation. For one, that is an expensive lifestyle to maintain. And even if you could vacation all the time, you probably would tire of it. Secondly, while you might live a healthy life for several years into retirement, you should prepare for health issues that can hamper your continuous vacation. Many retirees slow down at some point and have health issues that limit their mobility and/or require regular medical attention. Plan for a balance of regular everyday activities, doctor visits, socializing with family and friends, volunteering, and some traveling.

Myth #4: Retirement is the end of work.

While some retirees fill in their time with volunteering, a growing number of retirees are returning to the workforce in some capacity. Based on a survey by Merrill Lynch, 72 percent of pre-retirees age 50 and older say they plan to work part-time, full-time, or in an entrepreneurial endeavor after they retire from their primary career. With the potential for you to live well beyond 20 to 30 years after retirement, you might spend as many years in retirement as you did in your career. That’s a lot of time to make an impact by following a passion and pursuing an entrepreneurial dream.

Today’s retirement looks very different from decades ago and can be complex due to the lifestyle and number of years you could be in retirement. Having a solid plan is critical. At Reagan Financial Planning, we can help you develop a financial plan that is right for you. Contact us at (770) 658-9440 for more information.

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Created: 08 March 2017

• Marriage,
• Financial Planning
• Tips

Planning for your own future has its challenges. When you get married and combine your plans as a newly married couple, the challenge can be intense. Disagreements about finances is a big problem within some marriages, so getting the issues out in the open beforehand can help minimize these potential disagreements. Talking about finances before you get married is a great way to start your life together on the right path. Discuss your financial situation, assess your goals, and determine the best plan for your future together.

While working on this financial plan, here are some tips.

Align views on money

You have developed habits based on your personal views regarding money, and these might not be the same ideas that your spouse has developed. Your views are based on your own life experiences and the influences in your life. You might have taken a financial management class or taken a cue from your parents. These views are an indication of how you save, invest and spend, for both short term and long term issues. Talking about these views can help you and your spouse understand each other’s views on money and how you will manage your money in the future. It is not that uncommon to see newly married couples have at least three accounts – two single and one joint.

Create short-term and long-term goals

Goal setting and life planning are keys to a successful marriage. It’s one thing to align your views and quite another thing to make sure you understand each other’s goals to adequately plan your lives together. Remember to discuss timelines on your goals so you can differentiate between short-term and long-term goals. Some of the important questions to ask about include starting a family, purchasing a new home, career goals, and if one person plans to stop working when you start a family.

Evaluate financial commitments

Now that you have your goals out there in a plan, you will also need to be realistic. Discuss your current financial situation and the commitments you’ve made regarding finances. Full disclosure is critical to build trust and work in a married partnership. If you already have student loans, a car payment, credit card debt, child support payments, or other commitments, these existing responsibilities will impact how much money you’ll be able to spend and save as a couple.

Be clear about what expenses are whose

You are going to have different spending habits so it is important to agree on what you will consider joint expenses and what you will consider individual expenses. Be upfront and honest about the things that get taken out of each type of account. Differentiation requires trust and responsibility. It can be complex when there are responsibilities from a previous marriage, student loans, existing mortgages and credit card debt. You want to agree on the amount of discretionary money you will each have after the essentials are paid and savings are put aside. It usually works best if that discretionary money is divided in equal amounts for fairness, regardless of income divisions between you and your spouse. While moving forward after marriage, combining your finances into a single financial plan will help build a stronger relationship founded on trust and respect.

You don’t have to be married to start planning for your lives as a married couple. For assistance in making the best financial decisions and planning for your short-term and long-term goals, get help from a financial planner. Find out more by contacting us at (770) 658-9440.